China's Stocks Rise Most in Two Weeks on Manufacturing, Fee Cut

China’s stocks rose the most in two weeks after manufacturing expanded at a faster pace and the nation’s two stock exchanges said they will cut trading fees by 25 percent to attract investors.

Citic Securities Co. and Haitong Securities Co. led brokerages higher on speculation the regulators’ move may boost stock trading. Jiangxi Copper Co. and Yunnan Copper Industry Co. (000878)gained more than 6 percent after the Purchasing Managers’ Index rose to 53.3 in April, the fastest pace in a year. SAIC Motor Corp., the biggest Chinese automaker, climbed the most in a month after first-quarter net income increased.

“The cut in transaction fees signifies the government is putting emphasis on the capital market and this signal is very important,” said Li Jun, a strategist at Central China Securities Co. in Shanghai. “The manufacturing data means the economy in the second quarter may be more stable.”

The Shanghai Composite Index gained 42.12 points, or 1.8 percent, to 2,438.44 at the close. The CSI 300 Index (SHSZ300) advanced 2.2 percent to 2,683.49. China’s markets were shut April 30 and May 1 for the holidays. The Bloomberg China-US 55 Index (CH55BN), a measure of the most-traded U.S.-listed Chinese companies, advanced 1.1 percent to 104.65 at the close in New York yesterday.

The Shanghai index has climbed 11 percent this year amid speculation the government will take measures to boost the economy. Stocks in the gauge are valued at 10.5 times estimated earnings, compared with a record low of 8.9 times on Jan. 6, according to weekly data compiled by Bloomberg.

About 9.16 billion shares changed hands in the Shanghai Composite on April 27, or 16 percent higher than the daily average this year. Thirty-day volatility in the gauge was at 16.79, the lowest in two months.

Fees Cut

China’s two stock exchanges will lower fees charged for trading yuan-denominated shares by 25 percent with effect from June 1, the nation’s securities regulator said in a statement on its website on April 30.

The Shanghai and Shenzhen bourses will charge both buyers and sellers 0.087 percent of the transaction value, and the Shanghai branch of the China Securities Depository & Clearing Corp. will set transfer fees at 0.375 percent of transaction value, according to the China Securities Regulatory Commission.

The securities regulator released new rules for initial public offerings, saying the changes should make the price of shares “more reasonable” and improve disclosure.

Brokers Rally

Citic gained 1.3 percent to 13.17 yuan. Haitong advanced 2.3 percent to 10.12 yuan. A gauge of financial companies in the CSI 300 including banks and brokerages advanced 1.9 percent.

“The regulators are trying to revive and excite the trading in the A-share market, which has been a poor market over the last few years,” Khiem Do, the Hong Kong-based head of Asian multi-asset strategy at Baring Asset Management Asia Ltd., which overseas about $10 billion, said by telephone. “The spirit of the change is obviously to get retail investors to go back into the A-share market and increase trading activity.”

Yunnan Copper led gains for material companies, surging 10 percent to 18.89 yuan. Jiangxi Copper, the biggest producer of the metal, jumped 6.1 percent to 27.66 yuan. Aluminium Corp. of China Ltd. advanced 2.1 percent to 7.23 yuan.

China’s PMI rose from 53.1 in March, the statistics bureau and logistics federation said in a statement yesterday. That’s the fifth straight reading above the 50 level dividing expansion from contraction. The HSBC Holdings Plc and Markit Economics reported an April final reading of 49.3 for their purchasing managers’ index today, compared with a preliminary 49.1 reported April 23 and a final 48.3 in March.

Bear Market End

China’s longest bear market since 2005 is ending as government efforts to bolster the economy spur a rally in stocks, say the strategists whose buy recommendations two years ago preceded a 34 percent gain in the Shanghai Composite Index. (SHCOMP)

While the Communist Party cut its economic expansion target in March, Morgan Stanley Huaxin Securities and Guotai Junan Securities Co. say growth is rebounding from the slowest pace since 2009 as policy makers ease lending curbs. Value Investment Principals predicts stocks that benefit most from a buoyant economy will lead gains after they tumbled during the Shanghai Composite’s 423-day bear market. The retreat ranks as the second-longest since 1990, according to Birinyi Associates Inc.

“We’re definitely going to have a major bull market ahead,” Jerry Lou, the chief strategy officer at Morgan Stanley Huaxin in Shanghai, said in an April 24 phone interview.

U.S.-Traded Stocks

SAIC Motor gained 3.7 percent to 15.95 yuan. The automaker reported a 7 percent gain in first-quarter net income to 5.61 billion yuan. Coal stocks rallied the most on the Shanghai Composite. China Shenhua Energy Co., the biggest producer, jumped 2.7 percent to 27.62 yuan after it posted a 5.9 percent increase in first-quarter profit on higher production and sales.

In the U.S, the Dow Jones Industrial Average rose to the highest level since 2007, as faster growth in U.S. manufacturing fueled optimism in the world’s biggest economy. The Institute for Supply Management’s factory index rose to 54.8 in April from 53.4 a month earlier, the Tempe, Arizona-based group’s report showed.

The IShares FTSE China 25 Index Fund (FXI), the biggest Chinese exchange-traded fund in the U.S., rose 1.1 percent to $38.35 yesterday, the highest close since March 16.

Solar equipment makers including Yingli Green Energy Holding Co. (YGE) and Suntech Power Holdings Co. (STP) led gains in the Bloomberg China-US gauge yesterday as Citigroup Inc. said there are “signs of a near-term bottom” for the shares as demand for their products picks up.